Foreigners retain dividend power at top 20 NSE firms

The share of dividends earned by foreign investors holding stakes in the 20-biggest NSE #ticker:NSE firms increased by 22.1 percent last year despite a sharp drop in the proportion of the foreigners’ shareholding of Kenyan companies, an analysis of stock market data has shown.

Dividend payout to foreign investors holding stakes in the blue chip firms rose by Sh6.1 billion to Sh33.8 billion last year, up from Sh27.7 billion earned in 2017.

The payout was hugely supported by the jump in dividends paid by telecommunications company Safaricom #ticker:SCOM.

The increase in dividend earnings came despite a stock sell-off by the foreigners that saw their stake at the Nairobi Securities Exchange (NSE) hit a seven-year low.

Foreign investors pocketed 25.1 per cent of the Sh135.1 billion dividends paid by the blue chip stocks compared with the 29.2 per cent of Sh94.9 billion payout in 2017, the market data shows.

Safaricom was the highest dividend-paying counter in nominal terms for both local and foreign investors, having increased its total payout by 69 percent to Sh74.92 billion in the year ended March on account of normal and special dividends.

The telecommunications firm is a favourite of foreign investors, due to its high liquidity and rapid growth in the top and bottom lines.

“Looking ahead, the business will sustain its momentum of investing in the quality of our service and diversification of our revenue portfolio to ensure sustained returns to shareholders,” the telco said when announcing its results for the financial year ended March.

Foreigners’ marginal increase in Standard Chartered Bank #ticker:SCBK, Barclays Bank of Kenya (BBK) #ticker:BBK , Stanbic Bank #ticker:CFC and Diamond Trust Bank #ticker:DTK added to the impact of the entry of Bank of Kigali that saw their dividend earnings from top banks hit Sh18.98 billion.

This translated to a Sh2.03 billion increase in their dividend cheque despite their stakes in KCB Group #ticker:KCB , Equity Bank #ticker:EQTY, Cooperative Bank #ticker:COOP and I&M Bank #ticker:I&M dropping slightly.

The highest dividend-paying banking counter for foreign investors was Standard Chartered Kenya, which distributed Sh4.99 billion. This was a growth from Sh4.48 billion paid a year before.

Another foreign-controlled lender, BBK, paid out Sh4.38 billion, up from Sh3.95 billion, as foreign investors deepened their control to 73.51 per cent.

The bank, currently re-branding to Absa Kenya, says it will continue paying dividend to minority shareholders despite rebranding costs expected to slow down profits for at least three years.

“Our parent company, Absa Group will help us and other subsidiaries across Africa to absorb the costs by either providing capital or forfeiting part of its dividends,” chief finance officer Yusuf Omari said in a recent interview.

Against 84.13 per cent shareholding in Stanbic bank, up from 82.4 per cent, foreigners earned Sh1.92 billion, up from Sh1.743 billion.

KCB, Co-op and Equity’s payouts to foreign investors dropped by Sh445.85 million to reflect the decline in their shareholding in the banks.

Local institutional investors bought an additional 361.7 million shares in KCB Group, pushing their stake to the top spot and relegating foreign investors to third position last year.

Foreign investors, who were the highest group of shareholders in KCB at the end of 2017, have now been relegated to third with a 22.86 per cent stake. This is unlike in 2017 when they had 896.78 million shares controlling a 29.25 per cent stake.

KCB declared Sh10.7 billion in dividend, up 17 percent from the Sh9.2 billion it paid out the previous year. But having cut their stake in the bank, foreigners will get Sh2.43 billion, a slight drop from Sh2.69 billion earned the previous year. Foreigners’ stake in Equity dropped from 46.16 per cent to 43.8 per cent. They earned Sh3.3 billion in dividend as the lender retained total payout at Sh7.55 billion.

Foreign investors turned net sellers for all the 12 months of trading last year, doubling their sell-offs and cutting market participation at the NSE to levels last seen seven years ago. This was triggered by search for better returns in emerging markets.

However, they look set to make a comeback this year having recorded a net buying position for four straight months to end of April, according to analysis by Standard Investment Bank.

Half of the top 20 stocks by market capitalisation had net foreign buying positions in April with Equity, East African Breweries Ltd, KCB group and British American Tobacco attracting most interest from foreign investors.